Introduction to Sia and Siacoin. Part 4

Transactions, contracts and incentives on Sia.

Multiple-signature transactions on blockchain networks

For all the reasons described previously, it makes sense to have someone else verify and approve a transaction, be it sending funds or dealing with storage. Dealing with storage can be viewed as more important because often information has more value than just the financial value, which is why on the Sia blockchain single-signature transactions do not exist and all the transactions on the network are multiple-signature transactions. With multiple-signature transactions, a transaction requires signatures from multiple parties, making it impossible for just one party to make a mistake or complete a transaction that originated because of malicious intent. Here’s is an example of a scenario in which multiple-signature transactions are extremely useful: let’s say Bob and Alice want to open up a joint account on a blockchain network. The problem is what happens when Bob and Alice disagree. With multiple-signature transactions and accounts, Bob and Alice can designate Cindy to be the arbitrator of their account. Next, they give Cindy a key from the account as well. When they create a wallet, they create three private keys: one for Bob, one for Alice, and one for Cindy. If the wallet is 2 out of 3 wallet, then to participate in a transaction Bob and Alice either need to agree with each other or one of them needs to convince Cindy. In any case, a decision requires discussion between multiple parties and this is what multiple-signature accounts on blockchain networks are all about.

Contract parameters and details on the Sia network

In addition to switching all the transactions to multiple-signature transactions, Sia blockchain has also extensions compared to the Bitcoin blockchain that enable creation, enforcement and storage of contract data. The three extensions are actual contracts, proofs of storage and updates of contracts. Actual contracts contain information about files of sizes, hosts that will store the files and owners of the files via cryptography hashes. A contract on the Sia network also contains information that explains how often the storage provider needs to submit proofs.

A transaction on the Sia blockchain contains a number of fields, including arbitrary data that participants of the transaction may choose to include in it, inputs and outputs, files with contracts, proof of storage and signatures of parties participating in the transaction.

The Sia network determines that hosts are storing the files by asking them to provide random segments of the files. The network uses an algorithm that allows the network to make a conclusion that if a host is storing only 50% of the required data and has lost the other 50%, the host would only be able to submit storage proofs in 50% of the time.

The arbitrary data that transaction participants may include into the information about transactions allows users to include any types of data, providing both parties in a transaction a way to keep things organized by including notes, advertising space or creating a decentralized index of files.

Contracts on the Sia networks give storage providers an option to reject an offer to store files in case the files are illegal or a provider does not want to store files for some other reason.

Incentives on the Sia network

For Sia network, reliability of storage is a big issue because of the decentralized nature of the network. When you buy storage from a company that offers centralized storage, you enter into a contract with a business that has its reputation on the line, be it Amazon, Microsoft or Apple. You are dealing with a company that has been around for a long time and you hope that despite all the hacks of major companies, including Target, Equifax, Yahoo and Dropbox, that have occurred over the years you still can trust the company. The company has a phone number, email support and more, all of which create an aura of legitimacy.

With Sia and other blockchain-based storage providers, you buy peer-to-peer, meaning that you don’t know who you are buying the storage from. Obviously, when you buy storage, you want your files to be online when you need them. Many users would buy storage from providers that aren’t always online if they were still sure of the reliability and new when they would have access to their files.

The developers of the Sia network have come up with several solutions to help users achieve the desired level of reliability at competitive peer-to-peer prices.